Learning Through Lending: China-Africa Economic Engagement through FOCACs Past and Present

By Lucas Engel

As the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC) approaches, it is warranted to look back at the trajectory of China-African economic engagement and assess its current state.

For China, FOCAC, in its early years, provided a platform for assembling the ideological foundation of its growing ties with Africa while promoting policies that matched China’s needs as a growing economy with opportunities in Africa.

However, pledges and rhetoric at the last two FOCACs reflect the realization that Chinese and African needs and objectives do not reach perfect equilibrium without intervention and correction.

Chinese and African officials have identified fundamental deficiencies in their previous modes of economic engagement, and actions taken in recent years exemplify the political will necessary to implement changes. However, it remains to be seen whether China can match political will with financial means to bring about real change. A return to the infrastructure lending that characterized past China-Africa economic engagement is not realistic, and yet the recent focus on industrialization cannot succeed without infrastructure. FOCAC 2024 will indicate how, if at all, China and Africa might resolve this dilemma.

Economic interaction at the first FOCACs in the 2000s sought to lay the groundwork for trade relationships that would allow African exporters of primary commodities to benefit from a Chinese economy with double-digit growth and an insatiable appetite for raw resources. China-Africa trade grew from $11.67 billion in 2000 to $257.67 billion in 2022.

As China’s current account balance ballooned after accession to the World Trade Organization in 2000, dollar reserves turned from FOCAC lending pledges to Chinese-built infrastructure in Africa. Between 2000-2022, Chinese lenders provided approximately $170.08 billion in sovereign loans to Africa, around 64 percent of the total amount committed by the World Bank during the same period. Chinese loans to Africa not only narrowed the infrastructure gap left by traditional donors who shifted emphasis from hard to soft infrastructure in Africa and elsewhere but also allowed Chinese contractors and heavy industry to expand to new markets as the Chinese market became increasingly saturated and competitive.

The scaling down of financial pledges at the 2021 FOCAC and the complete absence of the word “infrastructure” from Chinese leader Xi Jinping’s keynote are often attributed to Africa’s debt troubles and China’s growing aversion to credit risks associated with African countries.

While these factors undoubtedly contributed to a general scaling down of financial pledges, they cannot fully explain the qualitative shift in rhetoric and pledges that reflect a growing awareness that more of the same will not fix fundamental deficiencies in China-Africa economic engagement. In this context, interaction at the 2018 and 2021 FOCACs can be viewed as a renegotiation of the basic tenets of China-Africa economic engagement.

African observers have expressed concern over the growing trade deficit and a disappointingly familiar pattern of the exchange of raw African resources for manufactured goods from China. Indeed, from 2000-2022, extractives comprised 89 percent of all African exports to China. Consequently, the commodity price crash of 2014-15 and sustained low prices contributed to a widening trade deficit with China that reached 2.6 percent of Africa’s gross domestic product in 2022. To that end, China’s recent focus on lending to small- and medium-sized enterprises and trade finance support indicate Beijing’s willingness to follow through on corrective measures and exemplify China’s sincerity when it comes to laying the groundwork for more diversified and sustainable trade with Africa.

However, quality without quantity will not be enough to turn lessons learned into tangible results. Effective support for industrialization and value-added industries will depend on China’s ability to integrate elements of its previous engagement strategy, especially infrastructure funding, into its new approach to Africa.

Energy infrastructure, in particular, will be key to realizing the potential of Sino-African collaboration on value-added industries associated with transition minerals. Yet Africa’s ability to absorb debt and China’s willingness to provide the level of loan finance that drove infrastructure development in the past represent hurdles that will be difficult to overcome. A renewed focus on infrastructure would have to rely on Chinese investment, a dubious economic prospect, as past Chinese investments in Africa focused largely on mining and manufacturing, not infrastructure.

Public private partnerships (PPPs) represent a promising avenue for risk-sharing that could attract Chinese firms to infrastructure investment, but the expansion of Sino-African PPPs is hampered by several factors. First, PPPs are relatively new to Africa. African governments are still in the process of rolling out the legislation and building the expertise that will allow them to negotiate, design, and implement PPP projects. Second, Chinese companies that are used to execute engineering, procurement, and construction (EPC) contracts in Africa will be wary of the higher risks and longer horizons associated with PPPs. Getting the incentives right will be difficult.

The emphasis, or lack thereof, on infrastructure at this year’s FOCAC, will be indicative of the potential for China’s new economic strategy to drive development in Africa. Chinese and African leaders can draw from 24 years of close collaboration and lessons learned, a powerful reservoir of knowledge. Efforts to correct past imbalances and embrace and preserve past successes will be necessary to realize the full potential of the Sino-African partnership.

Lucas Engel a Data Analyst with the Global China Initiative at the Boston University Global Development Policy Center.